This started out being an update to the previous post on the mortgage industry but I decided it really deserved its own space.
The WaPo's "Personal Finance Columnist", Michelle Singletary, has written - hang onto your hat - an investigative piece on the shady practices of mortgage lenders and come to the conclusion that it was - and is - much worse than we thought. Look at this:
You may better understand the problems with the mortgage-processing system by looking at CashFlow Strategies, formerly called Financial Independence Group, which was run by Georgia-based businessman Frederick C. Lee Jr. This case highlights how state- and nationally regulated financial institutions can fail to verify that borrowers are working with licensed loan officers.
Lee has been banned from arranging loans in Maryland and Georgia because neither he nor his companies were licensed for such activity. And yet, in violation of those orders, people working for Lee have continued to arrange mortgage loans that for many borrowers are inappropriate, according to sources and company documents. Equally disturbing is that these borrowers are paying fees on these loans that many consumer advocacy groups would call predatory.
Several Maryland homeowners acknowledged that they gave personal information to people working for CashFlow in order to get their loan applications processed. Some said they knew the loan originators used to work for Financial Independence; others said they were unaware. Candice Thompson, whose business card says she's a CashFlow marketing representative, assured one Maryland loan applicant that she was licensed and that the company was free of any legal troubles.
"Yes, I am licensed and no the company isn't under investigation," she wrote in a text message.
Thompson is not licensed as a loan officer in Maryland, according to state officials. The company is under investigation.
In a subsequent text, Thompson said she didn't have to be licensed in Maryland because she worked for Home Savings of America, which is based in Little Falls, Minn.
"we r federally chartered we don't have 2 follow state guidelines!" Thompson wrote.
Dirk Adams, chief executive of Home Savings, said that Thompson was not employed by the bank and that Home Savings had no business relationship with CashFlow.
There's lots more and what it amounts to is that these people have very little shame and no remorse to speak of. If they aren't prosecuted, they'll go right on doing it.
With Lee's history of regulatory run-ins, one would think financial institutions would avoid doing business with him. And yet Lee has continued to do business with banks and licensed mortgage brokers who fail to detect questionable actions by him and the people working for his companies.
Last year, Wachovia, the fourth-largest U.S. bank, funded 196 loans totaling about $54.2 million that Lee brought to the financial institution, according to an e-mail sent to Lee by Scott Davenport, a former national account executive with Wachovia.
"With the majority of the volume conducted in the 3rd and 4th quarter of last year, you easily would have been No. 1 with a full year of volume," Davenport wrote to Lee in the e-mail, its veracity confirmed by Wachovia. "Let's keep up the great work and push for a great 2008."
(emphasis added)
Neither Davenport nor Wachovia gave a righteous shit that Lee was in all kinds of legal hot water or that his numbers might have been badly fudged or that he was lying and ripping off his customers and the law was right on his tail. Screw all that. He made $$$. On paper (that's all it takes, I guess. The $$$ doesn't have to be real as long as the transfer to my bank account is). Let's keep our priorities straight, people.
Singletary concludes:
With major financial institutions failing to vet the people who bring them loan applicants, it's no wonder we ended up in this mortgage mess.
***
[B]ased on my investigation of one mortgage operation, which has continued to arrange loans despite state sanctions, what's needed is more criminal prosecution, not another commission with little power. After all, we're talking about loan officers responsible for explaining mortgage products, some of which have complicated terms and high fees, the types of products that have led this nation into its current economic mudslide.
(emphasis added)
Not only does it not look like there are prosecutions in the offing, industry lobbyists are effectively working to strangle any change in the regulations that might put a stop to the continuing theft that has so enriched them. And we're bailing these guys out...why? Because they convinced a few legislators with a need for campaign funds and not too many scruples about where they come from that, "gee, everything will be so much worse if we go down"?
Bollocks.
Here's the merchant bankers' argument:
"I know we stole everything in your house but the walls, but look: the walls are still standing. A little shaky, maybe, but they haven't fallen down. Yet. If you don't let us rip off everything in your neighbors' houses as well, we'll have to come back here and take your walls, too. Then you'll have nothing. Isn't a little something better than nothing at all?"
It's an absurd argument but with our legislators and blind watchdogs it's good enough - when the bankers are leaking money all over their office floors....
Screw jail. Line 'em up against a wall and shoot 'em.
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